The branding of Penang and other thoughts

I DISCOVERED the power of branding when Axis-REIT (Real Estate Investment Trust) was first listed in 2005. At that time, we were a boutique investment holding company that owned a portfolio of business parks and industrial assets. We decided then to list our assets under the newly released REIT guidelines but we had a great portfolio with a big problem – nobody knew who we were.

So, 18 months before listing, we went on a public relations initiative to let the market know who we were and why we were a good bet to invest in. It was hard work building the Axis brand but it has paid off handsomely. Today, Axis-REIT enjoys a strong share price, credible reputation and trades at a premium to our Net Asset Value (NAV). However, I must say that a strong brand can only be built upon solid performance.

We see stories of successful branding in the housing and commercial sectors. The“Setia Eco” brand by S P Setia Bhd has become a byword for investors looking for innovation, quality and capital gains in the homes they buy. A promise of innovative designs set amidst sprawling lush greenery had people queuing to book their units at every launch.

The other side of property market branding deals with location. Damansara Heights has become the brand for the rich and famous and is akin to the Beverly Hills of Kuala Lumpur. We started to see spin-offs on the Damansara brand such as “Kota Damansara” (more Sungei Buloh/Kepong than KL) and Ara Damansara (Subang Airport) leveraging on the effect of a name. The latest reference of the brand has been Kwasa Damansara (Sungai Buloh); the 2,000 acre iconic township being developed by the Employees Provident Fund.

All these are and will be huge successes because of their branding. Two other examples are the branding of Kampong Kerinchi as “Bangsar South” and Bangi as “KL South”.

Rebrand your location and bingo! Demand rises and sales take-off. I can’t see any serious buyer or investor getting excited about living in a luxury apartment in “Kampong Kerinchi” or “Bangi” but properties in Bangsar South and KL South present another investment proposition altogether. We need to give due credit to the developers of these projects as they have leveraged well on the branding.

Their invested capital has created an urban regeneration that has generated a value-added outcome on an unprecedented scale.

So what has this got to do with the subject of my article? Penang has great “brand power labels” – food, heritage, beaches, lifestyle, amenities and, an international reputation for attracting top Multinational Companies (MNCs) to invest in its industrial parks.

Credit must go the Penang Development Corporation (PDC) and “Invest Penang” in creating what other state governments have failed to do – having a focused strategy to attract industrial investment into the state.

How do they do this? By developing industrial parks where the cost of industrial land is fixed and kept artificially low and sold only to serious manufacturers. Industrial land sells at only RM35 per sq ft with full infrastructure. However, the raw land outside their parks is trading at double that rate. Besides the land prices, Penang has excelled due to its human capital and its labour force. Its educated, English-speaking and trainable workforce is a great attraction to foreign direct investments here.

Today, the workforce can also oversee the operations of the multinational corporations and offshore plants. Infrastructure here is of world-class standard and is accessible via air, sea, road and rail. The local supporting and ancillary industries have been exposed to nearly 40 years of industrialisation which are well-developed and competent, especially in the areas of precision engineering, automation, software development and packaging.

The branding of Penang

The Penang Development Corporation (PDC) has over the years, developed six industrial parks comprising 5,890 acres. Now however, available land has run out. To keep the momentum going, PDC launched the 1,500 acre Batu Kawan Industrial Park. Batu Kawan land lies south of Penang Island and comprises over 6,000 acres of land for development.

PDC has set aside 1,500 acres for industries which will be located on one side of the new Second Link complete with an interchange. At Axis-REIT, this is a Grade A+ location – they don’t come any better than this.

Even before the Second Link opened, the Batu Kawan Industrial Estate was open for business. To date, there have been significant investments which are still operating.

Recent announcements also include Ikea which has made known its intention to locate a mega store in Batu Kawan (Source fz.com).

However, Penang has failed to leverage off the Penang Brand when promoting the one area that will bring a huge amount of investments and development to the state as its industrial estates have some really odd names – Bukit Minyak, Bukit Tengah and Batu Kawan.

That makes it tough trying to sell the location to a foreign investor without the foggiest clue as to where these places are. The solution is simple. From earlier examples, rename Batu Kawan to “Penang South” and you will have a real estate boom. The PDC will reap the benefits of getting higher prices for its units and this will spur the developments on.

I personally wouldn’t mind having a home in Penang South so I can tell all my friends with a straight face that I have a home on the island of Penang.